Question:

Explain the product-market screening criteria that can be used to evaluate opportunities.
Also explain what Market Segmentation is and explain and provide an example of the Best Practice Approach for segmenting product-markets?

Answer:

Product-market screening serves the purpose of evaluating business opportunities. It facilitates the process of spotting and dropping poor product ideas at the earliest opportunity while identifying great product ideas that are worth developing. Product-market screening is crucial because it enables investors to prevent a scenario where poor product ideas end up being launched and developed. Product-market screening criteria need to be adhered to in order for the best product development opportunities to be seized.

The ideal screening criteria is one that qualitatively assesses both the business and technical merits of developing and commercializing the new product idea (Cooper, 1984). One of these criteria entails determining the availability of compelling evidence demonstrating that the new product idea is indeed new in the market (Cooper, 1984).

Another criterion should dwell on the unmet needs that will be satisfied by the product. This criterion gives the owner of the product idea the confidence that customers will indeed find the new product useful. Thirdly, it is imperative for the new-product developer to determine the availability of sufficient data that substantiates that these are actually needs of customers that have remained unmet.

The next criterion should assess the various barriers to entry into the market for the proposed product. To assess this criterion, focus should be on design patents, trademarks and issues of copyright. The developer should ensure that no one can easily copy the product or reverse-engineer it. Other important criteria include congruence between product features and unmet needs, design criteria, type of testing required, and the lifespan of the product with regard to existence in the market.

The issue of market segmentation should also be put into consideration. According to Grover (1987), market segmentation is the process through which an expansive homogenous market is subdivided into segments based on demand characteristics, wants, or needs. It is imperative for the Best Practice Approach to be used in the segmentation of product markets. An example the Best Practice Approach in this segmentation process is the assessment of four core aspects; namely customer needs, product type, customer segments, and geographic region.

References

Cooper, R. (1984). Criteria for screening new industrial products. Industrial Marketing Management, 13(3), 149–156.

Grover, R. (1987). A Simultaneous Approach to Market Segmentation and Market Structuring. Journal of Marketing Research, 24(2), 139-153.